How do sellers handle sales tax?

Short answer: most sellers handle sales tax by letting marketplaces do it for them — Amazon, Etsy, and eBay collect and remit sales tax on your behalf. If you sell through your own website, you have to figure out where you owe tax, register with those states, and file returns yourself.

Sales tax is the least exciting part of selling anything, and the part most likely to ambush you. Nobody starts a sticker shop dreaming about multi-state tax registration. But in the United States, selling across state lines comes with a quiet obligation that grows with your revenue, and ignoring it is the kind of mistake that compounds.

Why every seller suddenly owes tax in states they have never visited

Before 2018, the rule was simple: you only collected sales tax in states where you had a physical presence — an office, a warehouse, an employee. Then the Supreme Court decided South Dakota v. Wayfair, and the rule changed. States can now require out-of-state sellers to collect sales tax based purely on how much they sell into the state, even with zero physical presence there.

This is called economic nexus, and it is the single concept that determines whether you owe sales tax somewhere. The standard most states adopted: $100,000 in sales into the state in a year, or 200 separate transactions. Cross either line, and the state expects you to register and start collecting.

One important 2026 update: the 200-transaction test is disappearing. Illinois dropped it effective January 1, 2026, moving to a sales-only threshold, and Kentucky followed mid-year. More than a dozen states have now removed the transaction prong entirely, because it punished small sellers shipping lots of low-value orders. The direction is consistent — check your state's current rule rather than assuming the old two-part test still applies.

Marketplace facilitator laws: the part that saves most sellers

Here is the good news, and it covers most beginners completely. Nearly every state now has marketplace facilitator laws, which make the marketplace — not you — responsible for collecting and remitting sales tax on sales made through it. Sell only on Amazon, Etsy, eBay, or Walmart Marketplace, and the platform handles sales tax on those orders. You genuinely do not need to think about it for those channels.

This is the single most misunderstood fact in e-commerce tax. New sellers stress about registering in forty states; experienced sellers know the marketplace already did it. The platforms built the compliance infrastructure because the law forced them to, and your listings ride on it.

The trap is mixed channels. Marketplace facilitator laws only cover sales made through the marketplace. If you also run your own Shopify store or independent website, those direct sales are yours — you are the seller of record, and nobody is collecting for you. Plenty of sellers learn this the expensive way: fully compliant on Etsy, completely exposed on their own site.

Where you actually owe it: economic nexus in practice

For your own-store sales, the question is always: where do I have nexus? Two kinds:

Physical nexus: you have an office, employee, warehouse, or inventory in the state. Your home state always counts. So does any state where Amazon stores your FBA inventory, though the marketplace facilitator law still covers the collection on those Amazon sales.
Economic nexus: you crossed the state's sales threshold — usually $100,000 in sales into the state in the current or prior year — with no physical presence at all.

The practical approach is to track your sales state by state and watch each state's line, rather than memorizing one number. Thresholds measure different things in different states — gross sales, retail sales, or taxable sales — so confirm the measure before you count. A seller doing $90,000 into a state with a $100,000 threshold owes nothing there yet, but should be watching.

The actual workflow: register, collect, file, remit

Once you know where you owe tax, the process is mechanical:

Register for a sales tax permit in each state where you have nexus. This is usually free or cheap, done online through the state's revenue department.
Configure collection. Your e-commerce platform or a tax tool calculates the right rate at checkout — and rates vary by locality, not just state, because cities and counties add their own.
File returns on the schedule the state assigns you — monthly, quarterly, or annually, based on your volume.
Remit what you collected. The money was never yours; you were holding it for the state.

Sales tax follows destination sourcing in most states: the rate is based on where the buyer receives the product, not where you ship from. This is why automation matters — no human can memorize thousands of local rates.

The tools sellers actually use

Nobody does this with a spreadsheet past a certain point. The common stack:

Shopify Tax, built into Shopify, handles calculation and filing in many states for a per-transaction fee.
TaxJar and Avalara connect to multiple platforms, track your nexus exposure, auto-file returns, and handle exemption certificates.
Resale certificates: if you buy inventory to resell, you generally do not pay sales tax on the wholesale purchase — you present a resale certificate to your supplier and collect tax from the end customer instead.

For a small seller with one store and modest volume, platform-native tools are usually enough. Multi-channel sellers with real revenue tend to graduate to TaxJar or Avalara, because tracking nexus across five platforms manually is how things get missed.

The mistakes that actually get sellers in trouble

The classic errors are consistent enough to list:

Assuming the marketplace covers your own website. It does not. Separate channels, separate obligations.
Crossing a threshold and doing nothing. Nexus is not retroactive in most states — you register going forward — but ignoring it once you know is how penalties start.
Collecting tax without registering. This is worse than not collecting at all in some states, because you are holding the state's money without permission.
Forgetting that digital products and SaaS are taxable in a growing number of states. The "it's just a download" defense does not work where the statute says otherwise.
Treating income tax treaties or structures as sales tax shields. They are separate systems. You can owe zero federal income tax and still be required to collect sales tax in six states.

None of these come from malice. They come from the reasonable assumption that tax works the way it feels like it should. It does not.

What about selling internationally?

Everything above is about U.S. states, but sellers who ship abroad meet a second system: VAT in the UK and EU, GST in Canada and Australia, and each country's own registration thresholds. The EU's Import One-Stop Shop (IOSS), for example, lets non-EU sellers collect VAT on low-value shipments through a single registration instead of registering in every member state.

Marketplaces simplify this too — Amazon and eBay generally handle VAT collection on cross-border sales made through their platforms, similar to U.S. marketplace facilitator laws. Your own website shipping internationally is, again, your problem. Most small sellers start domestic, add Canada and the UK cautiously, and treat full international tax compliance as a "hire someone" milestone rather than a DIY project.

When to get professional help

There is a clear line where DIY stops being sensible: when you have nexus in more than a handful of states, when you sell across channels, or when a state sends you a notice. A sales tax consultant or a CPA who specializes in e-commerce can map your exposure in an hour — work that would take you weeks of reading statutes.

Think of it as insurance priced by revenue. At $2,000 a month in own-store sales, automated tools and annual self-checks are plenty. At $20,000 a month across five states, professional help costs less than one penalty. The mistake is not the size of the business; it is the gap between the size of the business and the seriousness of the compliance.

A calm way to think about it

Sales tax compliance scales with your business, and that is the reassuring part. If you are selling a few hundred dollars a month on Etsy alone, you have nothing to do — the platform handles it. The obligations arrive gradually, threshold by threshold, and each one is a sign that you are selling enough for it to matter.

The sellers who get hurt are not the ones who learn the rules late. They are the ones who learn the rules, see the thresholds approaching, and decide to deal with it later. Later is when the penalties live. Check where you stand once a year, automate what you can, and get an accountant involved before the numbers get serious — not after.

This is general information, not tax advice. When real money is involved, a CPA who knows e-commerce is worth every penny.